Business Directories

Bank of Sharjah posts Q1 profit at $22m

Sharjah, April 30, 2011

Bank of Sharjah has recorded a net profit for the first quarter of 2011 at Dh81 million ($22.05 million), compared to Dh134 million in the corresponding period of 2010.

An increase in the bank’s collective impairment provisions and the decline in regional stock markets contributed to the first quarter profit decrease, it said in a statement.

Total assets reached Dh20,666 million, an increase of 12 per cent over the corresponding March 3, 2010 figure of Dh18,419 million. Total assets are comparable to the December 31, 2010 balance of Dh20,618 million, it said.

Total deposits reached Dh14,765 million as of March 31, an 18 per cent increase over the corresponding March 31, 2010 figure of Dh12,482 million, reflecting customer confidence in the bank.

Compared to the December 31, 2010, figure of Dh14,377 million, the increase in deposits was 3 per cent.

During the first quarter of 2011, the bank’s loans and advances reached Dh12,704 million, an increase of 7 per cent over the corresponding March 31, 2010, figure of Dh11,854 million. The increase over the December 31, 2010, figure of Dh12,107 million was 5 per cent.

The increase in deposits over loans and advances has significantly enhanced the bank’s loans-to-deposits ratio, which fell to 0.86 in March 2011 from 0.95 in March 2010.

The bank’s equity at the end of the first quarter stood at Dh4,248 million, a 3 per cent decline compared to the December 31, 2010, figure of Dh4,395 million.

The decline was mainly due to the 2010 cash dividend of Dh210 million paid during this quarter. However, when compared to the corresponding March 31st, 2010, figure of Dh3,978 million, total equity registered a 7 per cent increase.

Compared to the corresponding period of 2010, net liquidity improved by 46 per cent in the first quarter of 2011.

As of March 31, net liquidity stood at Dh4,377 million versus Dh3,002 million as of March 31, 2010. When compared to the December 31, 2010 figure of Dh4,682 million, net liquidity decreased by 7 per cent.

This improvement in liquidity, which was driven by the 18 per cent increase in deposits, saw a 13 per cent drop in net interest income, due to the depressed interbank interest rates.

The decline in the regional financial markets, exacerbated by the recent political uncertainty in the Middle East, resulted in Dh 3.7 million loss to the bank’s trading investments portfolio versus an estimated gain of Dh25 million.

As of March 31, the bank’s collective impairment provisions reached Dh360 million --and its capital adequacy ratio, as per Basel II guidelines, stood at 24.91 per cent compared to 24.98 per cent as of December 31, 2010.

Fitch Ratings has recently reaffirmed Bank of Sharjah’s long-term issuer default rating at ‘BBB+’ with a stable outlook. The firm attributed the bank’s individual rating to its small but resilient franchise, high capital ratios, good liquidity and healthy asset quality.

Varouj Nerguizian, executive director and general manager of Bank of Sharjah, said: “The political unrest that occurred in the MENA region during the first quarter of 2011 negatively impacted regional financial markets.”

“The challenge of continually assessing risk and monitoring exposure to these markets, coupled with new risk classification measures introduced by the UAE Central Bank, might prove detrimental to the banking sector in 2011 considering the subdued economic environment.”

“However, the planned enhanced investments in infrastructure projects by the UAE authorities could lead to a resurgence in capital investment and consumption in the second half of 2011,” Nerguizian added. – TradeArabia News Service